Antitrust Law Daily Wrap Up, ANTITRUST—S.D. Cal.: Surfboard resin seller’s attempted monopolization, RICO counterclaims wipe out, (Jun 24, 2015)

By Greg Hammond, J.D.

A Florida corporation that sells resin for surfboards and other water related product repair failed to state valid attempted monopolization and Racketeer Influenced and Corrupt Organizations Act (RICO) counterclaims against a competitor in a trademark infringement suit. The federal district court in San Diego dismissed the counterclaims with prejudice, finding the defendant failed to allege monopoly power in the relevant market, with regard to the Sherman Act counterclaim, and failed to allege RICO predicate acts with specificity (Wahoo International, Inc. v. Phix Doctor, Inc., June 23, 2015, Curiel, G.).

Wahoo International, Inc. manufactures UV cure resins used on surfboards. It began selling SOLAREZ ultraviolet cure synthetic resin products in 1987 and owns the SOLAREZ mark. Wahoo alleged it owned a family of marks with the root suffix “-rez,” and that consumers in the surf industry associated the suffix “-rez” with Wahoo.

Phix Doctor, Inc. produces fiberglass repair products and accessories and announced in November 2011 its new “DURA REZ” product—an ultra-clear, sun powered resin that works on epoxy and polyester. After receiving a cease and desist letter from Wahoo and discussions with Wahoo’s president, Phix changed its mark to “DURA-REZN” in order to satisfy the infringement claim. Nevertheless, Wahoo filed suit, asserting claims for trademark infringement, dilution, and false designation under the Lanham Act and related claims under California law.

Phix responded with 12 counterclaims for monopolization, violations of RICO, unfair business practices under California’s Unfair Competition Law (UCL), intentional interference, negligent interference, defamation, fraud, and deceptive and unfair practices under Florida law. Wahoo moved to dismiss the counterclaims.

Attempted monopolization. The court first noted that Phix alleged the elements of an attempted monopolization claim, not monopolization. However, Phix’s claims that Wahoo succeeded in its attempt to grow its monopoly power over the resin, fiberglass, and particularly surfboard repair market, and that Wahoo is the more established and senior producer of resin, were conclusory. Without further facts, the antitrust counterclaim was not sufficient to state a claim for attempted monopolization. Specifically, Phix failed to assert that Wahoo possessed monopoly power in the relevant market. Rather, it contradictorily asserted in its counterclaim that both Wahoo and Phix Doctor are relatively small resin producers and competitors, which does not support monopoly power. Phix therefore failed to state a claim for attempted monopolization under the Sherman Act.

RICO. Phix additionally failed to plead the RICO predicate acts of wire and mail fraud with requisite specificity, the court concluded. In particular, Phix failed to allege: (1) the time, place, and parties involved in an alleged discussion in which Wahoo’s president agreed that “DURA-REZN” was an acceptable change to the mark to satisfy its frivolous claim of infringement; (2) which customers and distributors of Phix received alleged communications that stated Phix faced liability for selling its products; (3) the place and identities of parties concerning cease and desist letters that supposedly contained knowingly false allegations as to trademark ownership; and (4) the time and identities of parties that allegedly sent communications to third party independent sale agents of Phix. The RICO claim was consequently dismissed for failure to state a claim.

UCL. Phix’s UCL claim was based on the “unlawful” prong of the UCL and was premised on the insufficient Sherman Act and RICO causes of action. The counterclaim was consequently dismissed, along with the Sherman Act and RICO counterclaims. The remaining counterclaims were additionally dismissed as abandoned, because Phix failed to respond to arguments raised by Wahoo.

The case number is 13cv1395-GPC(BLM).

Attorneys: Richard Michael Wirtz (Wirtz Law APC) for Wahoo International, Inc. Isi Mataele (Mataele Law Offices) for Phix Doctor, Inc. Robert Arthur Johnson (Robert Johnson Law Corp.) for Stay Covered Inc.

Companies: Wahoo International, Inc.; Phix Doctor, Inc.; Stay Covered Inc.

Cases: Antitrust RICO CaliforniaNews